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Inducement / Best Knowledge

Typically the preamble for the representations and warranties will state that they are made to induce the buyer to purchase or the lender to make the loan contemplated.

1. Although buyer prefers seller’s representations and warranties to be absolute, seller will want to make them “to his knowledge” or “to the best of his knowledge: (which probably mean the same thing). Buyer or lender will then want the representations made “to the best knowledge” of seller or borrower “after diligent inquiry.”

2. Although all representations and warranties may be made with the same qualifiers, more likely buyer, seller and lender will want to negotiate whether each representation or warranty is absolute, conditioned on seller’s or borrower’s knowledge, based on diligent inquiry, or made only to the extent of Material Adverse Effect.

3. Representations and warranties may be made to seller, buyer or lender, or to their Adverse Effect.

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